You would think no one would ever go short the market but that is effectively what you are doing when you are out of the market.

To not be short the market you have to own the market or own something that outperforms the market.

Let’s look at 2025 to see an example of what not being in the market costs you. An all cash portfolio earned about 4%. The S&P return was 18%. The Stars buy and hold strategy earned 25% or 21 percentage points more than cash.

Hedge funds can short the market by owning options or ETFs that are short various indexes. Their performance after fees and commissions are seldom better than owning the S&P. In 2008 Warren Buffet bet the hedge funds they could not beat the S&P after commissions. He won.

Conceptually shorting the market allows you to make money in a down market. The problem is this requires calling market direction which people can’t do consistently. The market annually rises about 75% of the time. Shorting the market requires near perfect timing. If you are short the market you lose two times any upward move in prices. You lose on not being in the market and on the hedge. This destroys performance.

Shorting the market is not only very stressful but it is also seldom profitable. A buy and hold strategy using either the S&P or the Stars model is much more profitable.